The Government is considering developing a national interest test in the next phase of its shake-up to New Zealand's overseas investment rules.

Under the changes being considered, the Government would have the power to deny the sale of a business on the grounds it would be damaging to the economy.

But Act Leader David Seymour said this is simply a form of nationalism being proposed by the Government.

The Government is also considering whether there should be greater ability to consider water, Maori cultural values and national security when assessing whether or not an asset should be sold to an overseas buyer.

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The proposed changes come as part of the second tranche of the Government's reforms to the Overseas Investment Act.

Last year, the Government put a ban on foreigners buying houses in New Zealand as the first part of reforming the act.

Associate Finance Minister David Parker today launched public consultation to gauge the public, and businesses, opinion on more changes.

He told media this morning the proposed reforms are aimed at cutting red tape and giving decision-makers the ability to consider the broader impact on New Zealand of potential investments.

"The Government is exploring looking at where we draw the line as to what constitutes a New Zealand owned or controlled company and a wider national interest test for overseas businesses looking to buy Kiwi assets."

That national interest test would include widening what the Government looks at when assessing whether or not to give an overseas company the green light to buy a New Zealand asset, such as a business or a lot of land.

At the moment, Parker said, there are two sorts of screenings in New Zealand – land assets of more than five hectares and large corporate purchases of a business.

When it comes to the latter, the Government assesses an overseas investor's books, as well as applying a good character test – "so you're not getting corrupt investors coming in to New Zealand," Parker said.

Beyond that, the Government has no discretion to turn down a large investment.

Parker wants to change that to stop overseas players buying key assets – which could be monopoly companies – snapped up by foreign companies.

"Monopoly assets always earn a profit, sometimes they earn an excessive profit – why would you want to export the monopoly profit overseas?"

An example of this, Parker said, was when Wellington Lines Company was sold into overseas ownership some years ago.

"I'm not saying it shouldn't have been signed off, but I'm saying it should have been able to be considered whether it ought to have been sold overseas."

But Seymour said giving ministers wider powers to reject overseas investment would create a hostile environment for overseas investment and would actually make New Zealand poorer.

"New Zealand already has some of the most restrictive rules for foreign investment in the world, according to the OECD.

"Foreign investment is often accompanied by new technology and boosts production, wages and job creation."

Meanwhile, Green's co-leader Marama Davidson said her party would be pushing to make sure water extraction would be considered a sensitive asset.

"Water should not be for sale to the highest bidder. Changing the law is a key step towards protecting it for the generations ahead.

"We need to ensure that we are not giving water away to international corporations to reap profits at the expense of New Zealand's best interests."